Guilt-free ‘sin tax’ on tobacco

It looks like the Mandaluyong court that stopped the government from enforcing an anti-smoking law had been set up. But I can imagine the tobacco companies arguing: If activist NGOs can file test cases, two can play the game. Except that this time there’s a big difference, namely, the lack of candor. This isn’t the first attempt at sophisticated legal tactics to protect the tobacco industry, and I doubt it would be the last.

The Metropolitan Manila Development Authority had fined two security guards P500 each for smoking on a Cubao sidewalk, who then sued the MMDA and got a restraining order. Should this ripen into an injunction that would last during the trial, they would have to post a P100,000 bond.

Interviewed on TV, one guard said that the entire incident had been planned and that he had been promised money for his services. He later denied this, saying he was just nervous and not thinking too well when he answered. “Ako ay … wala sa tamang isip dahil lahat ng kapitbahay naka-tingin sa akin.” He also said that he, being “just a minimum wage earner,” was in no position to post the P100,000 bond. The Inquirer has also reported that the guards’ lawyers, in their website, also happen to list Philip Morris as a client.

I agree with MMDA Chair Francis Tolentino. “The complainants were planted and their arrest by our environmental enforcers was planned that’s why we can say that some businessmen were interested in this case.”

Last year, I wrote about yet another tobacco-related mystery. In June 2003, our Congress adopted the Tobacco Regulations Act that imposed a smoking ban in all schools and hospitals, in public places and transport. Wonderful news, right? But strangely, while the law required printed warnings on all cigarette boxes, it likewise deliberately banned more explicit pictorial warnings.

Come September 2003, and the Philippines signed the global anti-tobacco treaty sponsored by the World Health Organization (WHO), under which the Philippines promised to require health warnings that “may be in the form of … pictures.” So it turns out that, with regard to health warnings, the June 2003 law’s narrow rule on health warnings merely preempted the September 2003 ratification that would allow pictorial warnings. (For the record, I signed up with other lawyers supporting the Department of Health action to implement pictorial warnings in the Philippines.)

Today we witness a déjà vu in the House of Representatives. Rep. Hermelindo Mandanas, chair of its ways and means committee, is known for the famous Supreme Court decision that affirms the LGUs’ entitlement to their share of the Internal Revenue Allotment.

Representative Mandanas has sponsored a bill on sin taxes which, in the words of Filomeno Sta. Ana of the Action for Economic Reform, is “part of the deception, an essentially weak bill being dressed in reformist clothing.” Sta. Ana supports sin taxes, for reasons discussed below, but he warns that the tobacco industry has taken the offensive by “rushing a weak consolidated bill” and “using a smart but cunning argument that government loses much-needed revenues for each day that a new law on sin taxes is delayed.”

The Action for Economic Reform, to which Sta. Ana belongs, is one of the prime movers in support of sin taxes on tobacco. One, cigarette taxes are a sure-fire source of revenue since its smokers are slave to their addiction. Two, precisely because tobacco is addictive, government must set the moral tone by withholding its Good Housekeeping Seal of approval. Third, because smoking causes public health problems from which we all suffer (“externalities,” if you recall your Econ 11)—either from more coughing, more sickness or more taxpayer money by government health centers—and the sin tax will merely reimburse the public for the true costs that the tobacco producers now invisibly shift to the Filipino public.

Just like the Tobacco Regulations Act, the Mandanas bill is a Trojan horse. Sure it will raise tobacco taxes but that is a one-shot increase. If the problem with current tax levels is that they are frozen at 1996 prices, the Mandanas proposal merely replicates the problem by freezing tax levels at 2011 prices, to be revised 16 years from now if we go by the historical pattern. Worse, this favors old players and disadvantages new entrants to the market. To avoid this, the sin tax must be indexed to inflation and allow a yearly increase to keep abreast of rising prices.

Moreover, it retains a multi-tiered tax system that classifies tobacco products from the high-class to the cheapest variety. This defeats the public health rationale because smokers will merely shift to cheaper smokes, complicates tax collection, and discriminates among the varieties of tobacco products. The solution is to simplify tax collection with a straightforward unitary tax system.

Finally, the Action for Economic Reform explains that “the reform of the sin tax is not a new tax,” but merely a rectification of the loopholes in the current law to increase revenue collection and carry out health priorities.

I am actually impressed at the legal sophistication of the tobacco industry. I am sure that they have fought even more complex battles abroad, but they have increasingly lost those battles to the educated consumers in the wealthier countries. That is cause for joy. But what should alarm us Filipinos is that these companies have turned their eyes to new and emerging markets: developing countries, especially women and the youth, and prey upon backward notions and attitudes of macho cool and feminist modernity branded with their labels. Sin taxes are but part of the re-education that we need.

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